>> fed minutes hinted at the idea that tapering could begin sooner rather than later. they were talking about it coming in the coming months. take a look at the futures this morning after all of that. you're going to see right now. futures are indicated higher this morning, up by about 52 points for the dow. s&p futures are right now just about five points above fair value. among our market newsmakers today, we have mario gabella. he's going to help us pick some stocks that have room to run. that's starting at 7:00 eastern time. also, coming up at 8:40 eastern time, we have pimco's mohamed el-erian. it was pretty funny watching some of the readings and some of the takes on this afterwards. people say their heads were spinning as they went through the details of the fomc minutes.

as for today's market agenda, there are a number of key economic releases to be watching. at 8:30 this morning, we get weekly jobless claims plus the producer price index. later this morning, there's manufacturing pmi, the philly fed survey and leading economic indicators. in earnings central today, retail is once again the key them this morning. companies reportsing before the bell include target, dollar tree, abercrombie & fitch and game stop. we'll be watching closely after what we heard about walmart. andrew, over to you. >> thank you, becky. we have corporate news this morning. the government rejecting fair homes recapitalization proposal of fannie mae and freddie mac. here's what happened. obama adviser gene sperling arguing the only way to revamp the home loan market is through what he calls proper housing finance reform. he didn't directly refer to fair homes proposal, but he did say that the administration can't allow fannie and freddie to be

recapitalized in the current corporate form. last week, bruce berkowitz's firm announced it wanted to buy the mortgage backed security insurance businesses of fannie and freddie by bringing in $52 million in new capital. a trading slump in goldman sachs now tied to a currency trade in the third quarter. a bet on the dollar is said to have gone very wrong. "the wall street journal" reporting that the previously indus closed trading mishap played a big part or at least a part in the revenue slump that led senior executives to defend the firm's trading strategy. yum brands will combine the u.s. and international versions of kfc and pizza hut. sales at yum china restaurants have taken a hit since chemical residues were found in chicken from some of its poultry suppliers china late last year.

>> there was a restaurant called chicks in pies. kind of gross to me. >> i don't believe that's what the real organization was going to be. the question is, where is the jacket? your jacket. >> over there. >> why, though? you go on for the first time in the history of show over there without a jacket and you do it without comment? >> i do it without comment. >> can you tell me, what were you thinking? >> i didn't think the jacket was looking great. >> you are so vain. you didn't think this one looked as good as your other jackets -- >> can it you, this says more

about you than about andrew. >> because i'm obsessed. you are obsessive compulsive. >> the first time in two years. >> i said to myself, i don't like this jacket and then i took it off and what was the end of that. >> that's how it happened. it is big news. by far. i'll tell you, the must read, i love the headlines. my favorite thing today is the very top story, very first headline in the journal the fed released policy minutes saying

they do plan to stop bond buying. >> at some point. >> you said it was qe. >> so is it possible that there was a proposal on the table to continue this? forever? is this really news that they still plan at some point to pair back their bond purchases? did someone write that with a straight face? >> it's hard to write a headline that sits in there. >> don't write a headline that -- you know, this just in, we're all going to die -- actually, this just in, you need to breathe to stay alive. let's see what we've got here. maybe we can repeat some of the journal's profoundness here. in washington today, the senate banking committee is expected to back the nomination of janet yellen as the next fed chair. that nomination will then be sent to the full floor for confirmation and then we'll get started. and i guess the real question,

does the bernanke, does he get it going in december? i think he should. >> i think there's a very good possibility for this. >> he said no. >> if you get another good jobs report -- >> not anytime soon. i'm saying soon. >> but i am -- >> although the futures this morning being up 52 -- >> well, the market was down 70 yesterday. >> 66 points. come on. >> it was down based on what they said. >> the idea that this is like the longest three-day losing streak in two months -- >> it's horrible. gut wrenching. whatever. it's gut wrenching. it should go up every day. it could go up every day because they're never going to end the bond buying. the futures this -- i'm still -- i don't know. i count on things, you know? some things, i count on you and your -- but it's just in your mind, so you walk past the mirror .thought, i don't really like the way my jacket is looking today. i'm going to go without it. >> that was pretty much the

assessment. it didn't take that long. >> i realize i do like it when you do it over there. because the two of us in a two shot look like the same person. >> because you're wearing the same ties. >> you know what i almost did this morning? a bow tie. >> this is cable. >> i tried to put it on. but i was running out of time. >> that's what you were talking about because in makeup, you told the girls i was playing with it this morning but i couldn't get it to work is what he said. he said that. and i turned around and i went, oh, my god. >> this squawk ward moment has been brought to you by joe kernen. >> that is joe kernen. >> i had the hair dryer on so i missed the first part of the conversation. i turned it off and i hear, i was playing with it this morning and i couldn't get it to work. i go, did you wake up your wife? did you consider that? because she knows how to tie a bow tie, right? >> very good. >> let's go to the market. i get a kick out of myself.

there it is. but you know that. up 48 points this morning. you said 60. or 50. it's 48. >> it was 50 a minute ago. >> we'll see what -- aren't we getting some claims numbers and stuff today, too? >> yeah, we are. 8:30, initial jobless claims and that could very well be some of the data the fed is watching. >> i could help you, by the way. >> with his bow tie? >> yes. anyway, let's check out the oil boards this morning. oil has been weak. i can, yeah. no, i can't. i've got something for you. anyway, you can see it, 93.76, down 9 cents. it's well below 100. we'll see whether all these guys that say oil can never go down again, see whether they're right. are we at 1.34 on the euro? ten year first. that is. you saw that yesterday. >> it happened immediately. >> and the euro immediately went under, which looks like whatever they said was more hawkish than

what people thought. it's time for the global markets report and ross westgate is standing by in london where i would say a higher percentage where bow ties, over here, people that do it look like orville redden babacher. over there, it's still done, but by a higher percentage, too. but not by you. >> i would say, actually, nearly everybody that i interview now wearing a bow tie are american, joe. >> that's weird. i've seen americans go over there and start calling it rubbish and say i've been standing in cue. >> aluminum. >> yeah, yeah, like madonna. suddenly she's british. geez. isn't she from chicago or something? >> detroit. >> yeah, from detroit. now she speaks like, you know,

like princess di. anyway, so the americans are the ones that are doing it. that's funny. >> yeah. i can't remember the last time i interviewed a brit that actually was wearing a bow tie. and in the city where you thought you -- i don't see any. i think it's sort of gone. the only time you see it is at a black tie event. >> well, that's okay. and, you see, i'm with you. with the tux, i think the other ones -- you look like an actor. you look like he didn't think it was important enough to put on a formal -- to put on formal wear. do you think it's okay? i think that looks much -- a tux looks much better -- >> how do you feel about a mandarin collar with a stud? do you remember when denzel washington used to that? >> ross, i didn't know and becky is not up to speed on this that at a truly formal dinner, the casual dinners, you wear a black tux. but at a formal dinner, they're

still uppity, someone wore a regular tux and people were whispering about it, look how he shows up here like he's living on the streets. hilarious. it was the butler. the driver is now part of the family. it was him and he had some -- you know the guy i'm talking about, right? yeah. yeah, yeah, yeah. the chauffeur. >> the chauffeur. not butler. >> the younger daughter who died and -- >> yeah, yeah, yeah, oh, thanks. >> i'm so far behind i'm insulated from -- >> but this person who -- >> don't tell me. >> get the box set, becky. >> i'm going to. >> and sit down for over a weekend. >> i'm going to. >> you might get confused because she die necessary childbirth and she comes back like -- no, that doesn't -- we're mixing. >> walks out of the shower and nothing has changed. that was a different series, wasn't it?

>> sorry, ross. but we digress. >> here we are. let's move on. we are 6 to 3 just about, decliners outpacing advancers at the moment. but we're up at the best levels of the day. data today has been the focus of european equities ahead of the u.s. open a little later. mainly out of the eurozone. slightly mixed in some ways and a growing die vern die vergeanc. what we saw was german pmi ticking up for the month of november and the flash estimates better than expected. the french number, very disappointed. it was 50.5 in october. the french economy contracted in the third quarter, down 0.1%. and if activity levels stay in negative territory, there's now a fear france might be tipping back into recession which over here is defined as two quarters of contraction. but that is now the fear. growing divergence between those

two economies, we have growing data out of the uk. it improves not quite as much as we thought, but there is now a chance that the uk will borrow less than originally forecast by the office of budget responsibility. take a look at the sector breakdown. there's some reaction today to the chinese pmi data. the hsbc data, pmi at a two-month low. weaker than we thought. basic resources down as a result of that. and that's just about it for me. apparently the director is telling me we've got some treat. i have no idea what it is. there we go. that is me doing my -- >> whoa. >> wow. >> be still my beating heart. >> my bbc impersonation. >> seriously, ross. >> looks like rhett butler. >> he's handsome. you're more handsome there than normal. is it the moustache or what, do you think? >> the way he has his eyebrow cocked. >> you see, that's a letdown

there. >> really, that was rhett butler. >> very nice. >> frankly, my dear -- anyway, okay. we can't be -- we need a johnny quest. we need your lips moving in that shot. i wish we could do that. see you later. thank you. >> see you, ross. >> oh, this is yours. >> we have some other news this morning. >> butler, yeah? >> really? >> while you guys study ross butler, we have news this morning on tesla. consumer reports saying that the model s has taken the top spot in its car owner satisfaction rating. owners of the tesla model s gave it a 99 out of 1 his 100. >> i've heard that number before. >> you heard from consumer reports about a month or two ago was actually that they had the highest safety record. >> 99. >> and i believe it was a 99 or

something. this is about satisfaction. but, of course, this comes as the car is also under some government scrutiny. phil lebeau caught up with the head of national highway safety, the safety at administration late yesterday about its investigation into the tesla s. >> once we made that decision and once we talked to tesla about that decision, they were more than open about saying we want the highest level of scrutiny, we want to cooperate with you on every level of this investigation. they feel very strongly about the quality and safety of their vehicles. we have a lot of questions to have answered. they're willing to step forward to the plate and be collaborative is very positive. >> that's a very positive statement from the government. usually it's much more contentious. take a look at what strictland had to say about how long the investigation might take. >> no time frame. we really want to get this done right. sometimes investigations take a week, sometimes they can take several months. i have no notion or real indication how long this will

take. but with tesla being willing to be proactive, hopefully it will be on the shorter end than the longer end. >> there will be a lot of volatility around this trade for quite a while. the stock now trading at about 120.50. it was off, close to 200 earlier. >> 99 on both of those. it's like -- you know, do they have something on these people? consumer reports, that's -- >> that's pretty good. >> it is. >> and that's why i'm anxious about -- >> they can't -- i can't imagine -- i mean, consumer reports, like my dad for toasters, everything. >> everything. >> he used consumer reports, you know? >> u.s. regulators have blocked automakers from promoting vehicle safety ratings of more than five stars.

this comes three months after tesla touted an outsized for its model electric car in a press release. the announcement adds to tensions between the national highway safety administration and tesla. they seem to be singing kumbaya together. you know what i mean? >> they're happy campers. >> happy campers. what our cliches can we use? >> kumbaya, that's why i used the happy campers. >> it's yours? >> yes, it is. sears holding just came in with quarter le results. it looks like the retailer lost about $5.03 for the third quarter. that was wider than the $3.39 share loss than analysts were expecting. revenue was shy of estimates, as well. down 4% in the sears chain. if you look into this release, there's a lot here. eddie lampert is talking about how they are trying to change this into a member centric

retailer. i don't know exactly what this means, but if they are trying to make this whole thing into a membership club like a sam's or a coastco where you pay a membership fee that comes in. he does say they are spending lots of money, millions of dollars, trying to transform -- transformations of this scale are challenging, but we believe we're making progress and we're seeing -- >> how many years has it been? >> ten year increases. a lot of years. the poster child. >> they are going to these places. i have to say, when you walk into these places, they for years have not reinvested in the store. it's hard to find someone to help you if you have questions. this makes it sound like they're reinvesting, but it's definitely

going to hurt their earnings. but it had been years and years since they have properly invested in these stores. and it catches up over time. it's like casino business. if you're not constantly putting money back into it, people don't want to come. >> apparently they've done very well on line. >> well, the stock is here. >> you saw the stock, right? >> market cap of -- yeah. >> it's done better from 45, but remember how much it went up on what supposedly was going to be unlocking the real estate? they never did that, no. all right. here we go. coming up, why american airlines says getting an upgrade to first class could be as simple as making an online bid. but first, as we head to break, alex wallace joins us from the weather channel. >> i don't even know how to follow up with that.

let's talk about the forecast here. we've got some snow this morning in and around denver. light snow, pretty cold. could make some slick spots this morning for the commute. i'll be watching the area from the rockies into the plains. the risk of snow continues today. tonight, we see that shift farther south. potential icing conditions, panhandle of texas, including amarillo, back up across parts of the southern plains. active weather here in the middle of the country. we'll be watching the temperatures drop quite a bit. but then tomorrow morning, 20 degree drop in temperatures. so folks on the east coast want to be looking at this closely, including new york city. here is how you'll fare as we head on through the next few days. by monday, expecting highs in the low 30s. that's your national forecast. more "squawk box" coming up next. >> announcer: before the hit the road, here's your travelers

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>> announcer: india, with 94% of workers constantly checking office e-mails and voice mails. welcome back, everybody. right now, it's time for the executive edge. this is our daily segment focused on giving business leaders a leg up. a group trying to encourage washington state to keep up its fight to secure work on the new boeing 777 placed an ad in the seattle times yesterday. but there was one problem. the top of the full page ad shows a picture of an a-320. that's a plane made by rival airbus. boeing executives have been meeting with officials in the states interested in landing work on the new aircraft after the company's largest union rejected a contract offer last week. the funny thing is, this ad says the future of washington but it's an airbus plane.

>> there's two pieces to this story. one is the screw up that was a picture of the plane. the other is what's going to happen on the ground, which is whether they're going to build the 777x in washington or the elsewhere. >> that's what the ad is about. >> that's what the ad is about. >> but it's funny that they put -- >> but guven whativen what's go with the union, it's possible they could go to other states. >> it's a plane. it's got wings, windows. >> but you're talking about in seattle where you have a lot of people who work for boeing. it's a more advertised plane there. >> but it was an ad agency there, isn't it? >> i'm sure. they tried to get comments from the people who placed it or who did it. someone messed up along the lines. for people who weren't watching the last time around, it was brought to a union vote. boeing said they would stay in seattle, but they wanted some pretty big concessions from the

union in order to do that, including giving up their pensions. and the union voted overwhelmingly not to go along with that. immediately, boeing officials started going to other states to see if they could get a better deal on somewhere else. >> it's funny. i mean, i don't want to laugh too much. we're over 20 years being here, there's funny things that happen when you order people with the same names and you're talking about some important stories. >> same names. >> you know what was done. we've done the taj mahal casino and put up the taj mahal. >> really? i missed that one. >> we often get the wrong face. >> the worst was goldman sachs and we put up a picture of ron goldman who died. this was a long time ago. we were talking about i.r.a.s and there was a terrorist that we put up for like an individual retirement account. there's things that, you know, can happen. >> i'm so glad we did this segment. >> this was long ago, this was the old management and old --

none of these people were here. >> i don't even remember any of these issues. >> yeah, 22 years. i remember -- and you know i don't forget stuff. that's true. we know you don't forget anything. >> you are an elephant when it comes to memories, joe. >> which is also the symbol of the republican party. they have we have andrew. it's an -- just kidding. is it a donkey? >> it's a donkey. >> who picked that? >> i don't know. a weak and meek animal. >> let me tell you guys about american airlines. it is testing the ideas of allowing customer toes bid for upgrades to the first class cabins. some of those premium cabins, they say up to six days before the flight, passengers can submit a bid to the website along with a credit card number. the e-mail will send a number to check in to let you know if you won the auction to do these things. it's not guaranteed anyone will

get a seat and it's not guaranteed that you'll get a first class meal if -- >> quick, was that an airbus or boeing? >> boeing. >> i don't know. >> it's hard to do. >> yes, but we aren't in seattle where a lot of people would -- >> big planes with fuselages and wings and they look sort of alike. >> the question is a cheap traveler. i don't know where you stand but -- >> are you a cheap traveler? >> i'm the guy who likes to buy the coach seat and hope and pray and sweet talk my way up front if i could. >> but would you be willing to put a blind bid in and say i would pay $100, $150, $200? >> i don't know, they go to -- >> ebay inspect. >> no, it directs you to price line. there's ways to gain price line. how much does it cost you to upgrade or not? >> it's nice not to have to walk all the way back. but the food, no one would pay first class for the food.

>> i'm just buying leg room, space. >> but you guys would do it? >> we have to cut that out for the rear-end reyear-end reel. i'm just buying leg. >> i do pay -- i call it poor man's first class, the exit row. >> i pay for that, too. >> i hunker down next to the window a lot of times. i don't want people walking by hitting me with their luggage. >> you want to be the person who wakes up everyone when they're trying to go to the bathroom? >> for like the eighth time. >> i'm the same way. i'd rather be the waker than the wakee. on that note, when we return, we're going to talk about going beyond the fed. plus, a market watcher identifies the most undervalued s&p sectors. first, as we head to a break, let's take a look at yesterday's winners and losers..

good morning. i'm joe kernen along with becky

quick and andrew ross sorkin. making headlines this morning, the bank of japan is keeping monetary policy steady today. the boj maintaining its view that the economy is recovering moderately. policy members are hopeful that the continued strength in the domestic demand will offset head whipped from soft overseas growth. hopefully you didn't see the carbon emission news coming out of japan, andrew, abandoning targets because of the economy. also australia just trying to repeal the entire carbon tax. a couple of setbacks. unless you like south carolina weather. which i happen to like. but anyway -- >> it's a little warm. also, a little bit of washington weather, too. the obama administration warning the government would likely begin defaulting on its obligations within a month of february 7th if congress did not raise the cap on government borrowing by then. becky. a u.s. congressional panel

has approved a bill targeting patent control. that's a company that buys licenses or patents from others and files infringement losses. they're going to go after all those patent trolls. i like that. >> it's like squatters on -- someone squatted on you for a while on your domain name. you have a squatter. >> someone is on mine, yes. becky quick.com, not twitter any more. >> there's still someone on my twitter thing, i think. how about joekernen.com. is anybody on that? >> i think someone does own that. >> not you. >> not me. >> you've heard the gloom and doom and the frothy markets. but our next guest, it says here, is not worried. i'm going to take the teleprompter's word for it on this. he's identified the most undervalued sectors.

mi mike tohompson at s&p iq. and the founder of the entire news organization. >> no, no. >> you would not be here working if -- and there's not a p in thomson, either. >> no. >> and you had a job there for a while when you would make phone calls. >> mcgraw-hill. >> anyway, is that true? you're not worried? >> i'm not really worried. it's a historical perspective here. you know about that. basically, we have on the basis of forward 12-month basis, the valuations aren't all that rich. and this actually -- this was an interesting research insight that came out of -- and conversation with an investor would says, you know, boy, the markets have really moved up. this is what people are saying. so when you're trying to get people into new strategies and new funds, this is what you're up against. you have to come up with a

rationale as to why they don't have to were. really, the question is how far have valuations come since 2008? and what was surprising is when we look at it on a sector basis, i was surprised to see that the biggest increase in valuations, the perceptions of what investors really want are in the consumer discretionary sector. doubling. you're over 32 times next year's earnings, almost 100% increase in valuation. the leading sector and not even somebody close. .you've got to wonder why is that? why are investors valuing these companies so much more than other ones? >> this those start to go make it look like energy are the most undervalued based on this? >> that is not right. energy is the second most biggest increase. i'm not sure if the chart is articulating it well. but what i will say is they've seen the increase up about 25%. >> this is an absolute stock price or in multiple expansion?

>> multiple expansion. most investors -- we talk a lot about earnings growth and we talk about absolute price. but the metric that investors are focusing on and what all the analysis comes down to is how are they trading on valuation? >> and in the last five years, what was the multiple five years ago and has most of the growth been fueled by earnings? >> and that's where it gets to be an interesting narrative. you have to rationalize it, right? one, i think what we talked about, and this is a pretty robust discussion, people value brands at a time when it's less -- i guess the value -- or the uncertainty around other things, they liked quality around known brands, existing companies secondly this coexists nicely with the fact the one sure thing in the u.s. economy over the last five years, the steadfast recovery that we have seen, what recovery has been

because consumers have been continue to go spend. retail sales, this stuff tailed beautifully with that, that cool concept, because they're going out and they're still going to darden restaurants, they're still going and basically they're going on cruises. they're buying on amazon. it's remarkable. and i think i would add one more thing. they have implemented the technology that was basically developed ten years ago into e-commerce. and it's amazing how retailers have improved their margins largely because they've taken brick and mortar and created a hybrid where now they can make a boat load of money through other things, through the cheaper cost of goods and things like that. but there's a whole confluence of things driving this if you take a look at the rationale. but what's startling is consumer discretionary, this is not information technology. and then the rub of it all is the biggest contraction in multiples is in information technology. down 23%. investors valued them 23% less

than they did five years ago. and they're probably the enablers of a lot of the other sectors, you know, benefits. >> so the thing that -- and then i want to talk to you about something because i just thi thoug thought of something. but profit margin webs that's the thing people are talking about. we've had peak profit margins and they're bound to come down and that would be a stumbling block. does that make you consider -- >> look, this is one perspective. there's a lot of things that could make -- generally, even the market is up about 14% on a pe basis. so if you look at the s&p 500, you're trading at 17.9 times next year's earnings. however, joe, back, you know, during the bubble times and in 2000, '99, you were up in the 20s, okay? so in that perspective, it doesn't seem extreme. but, again, if the fed starts to tapering, do you bring the whole market down?

i think it's fascinating that you have this sublime -- i get energy being up there because the world is valuing energy and materials because we're in a global economy. i really was surprised by health care, joe. the reality is is that with all that's going on, there's not been a lot of -- about 7% accretion and everybody thought with all the changes going on, you'd see more value and more business driven into health care with an aging demographic. it's an interesting perspective. you take it in balance with a lot of other things. >> so consumer discretionary have done really well. they've made a lot of money in all this stuff. they're not spending, but they've made a lot of money and income disparity has widened. >> correct. >> would it perhaps be okay to raise the minimum wage or raise the labor forces? >> i've been thinking a lot about that. >> participation. because we've already given all of this upside to the owners of

the retail corporation. so the right would say that you're taking jobs away from other people. but would huffington post make the point that, look, even rich the shareholders already. why not share some with the people making $7 an hour. >> not an opposed to it as i used to be. >> but if you've already made all the money and taken the gains in stock price appreciation as the one percenters, what's wrong with shares some with the workers stocking this consumer discretionary -- >> i'm just asking you. it's a talking point. >> the idea that i think is more pervasive is wouldn't that help a lot of these companies, too? >> because it should go up the chain. that is the argument. not necessarily the right argument, but that's the argument. >> because if it's moved 100% times in valuatiovaluation, any has a retail stock has done very, very well. >> how about rewarding some of the people that are working every day in those stores? >> unbelievable --

>> are you setting up a -- >> no, i'm just -- i think about things and i'm just wondering as a talking point where that makes any sense. >> i have been thinking a lot about this. >> i've been working with both of you for a while. some of this is rubbing off, maybe. >> wow. >> i've got stockholm syndrome, i know. >> i'm glad you were here, mike. >> what do you think? >> that's a ridiculous -- that's not the way things work, right? >> well, listen, it's a diversive company as harley davidson to darden restaurants. it's wisely said. it's an interesting anomaly. i think you just have to consider it with a variety of other things. i just think it's an interesting perspective. >> thank you, mike. >> thank you. well, you guys remember the facebook fight between mark zuckerberg and the winkelberg twins? a similar battle now seems to be brewing at snap jack.

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♪ welcome back to "squawk box" this morning. a business insider story this morning included leaked videos that showed that the snapchat ceo is saying the ousted co-founder may deserve something for his role at the company. three guys who attended stanford university together are now tangled in a bitter lawsuit over equity in today's hottest start-up. hundreds of millions of dollars are on the line, of course, and business insider has videos of

depositions from the snapchat lawsuit. they suggest even the defendants in the snapchat case believe their former fraternity brother may deserve something for his role in starting the company. >> did you come up with the idea for deleting picture messages? >> no. >> did bobby come up with the idea? >> no, he did not. >> who came up with the idea? >> reggie did. >> business insider says sources close to the company say the likely resolution of the case is a settlement in which snapchat's third co-founder reggie brown will receive a significant amount of cash, similar to the settlement that winkelberg brothers got when they sued mark zuckerberg over the origins of that network. >> don't confuse people. >> i don't want to confuse people. coming up, a top ranked nba start-up. plus, tonight, don't miss the season finale of american greed. we're coming right back in a moment.

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welcome back to "squawk box." it's global entrepreneurship week, and the business school website out with its first ever top 100 mba start-ups. joining us is john burn. john, it's been a long time, how are you, sir? >> okay. very good. >> congratulations on the list. >> thank you. >> here's the question.

we've had a number of the people of the folks on the list on the program this week. and the question i always have is the entrepreneurship be topped? >> i don't think it's a question of being able to be taught. why people are going to business school is to learn the core basics of what makes a business work. but also for the networks. and it's kind of interesting that of the 100 top start-ups, 34 are from harvard, 32 from stanford, 11 from m.i.t. they basically blow away the competition. and when you really ask why, it's because the networks from those schools, the venture capitalists to angel investors, the alumni networks that get you in the door to get important customer relationships and clients are just unbeatable. >> and so is it -- but then a question, is that a self-selection issue meaning both in terms of intelligence and aspiration. you end up at an institution

like that and take advantage of it? or is it something else? >> no, i think you're right, joe. that's part of it. obviously these schools are tracking the best and the brightest of 20-somethings. they're going to be successful whether they go to goldman sachs. the best thing now is entrepreneur is incredibly high. at stanford this year, 18% of the graduating class decided to start their own company. even back in the heyday, the bubble, the dot com bubble in '99, 12% only. it's 50% more at stanford starting their own companies. so it's become very hot and a lot of people are very -- i would say they're very conscious of what business school can get them. >> right. >> our number one company sold to google last year for $450 million, started by a couple. they were engaged, one went to stanford, the other one

deliberately went 3,000 miles away to harvard because they wanted to take advantage of both alumni networks rather than one. >> so, john, that was andrew earlier. this is joe now. this is your company now. so you took all of your knowledge about start-ups and now you're going to be like a big mega bucks internet gazillionaire, right? >> i doubt that, but we're having a lot of fun. >> and you've been on in the past talking about the great welch, right? what do we call him now. he needs a bigger name than jack welch. >> king jack. >> king jack. king jack is good. anyway. >> that's true. >> so this is interesting that you took your experience -- you were everywhere, right, "fast money," business week, following entrepreneurs now you are an entrepreneur. >> yes. my company is now 3 1/2 years old. we have three websites, published books, doing digital magazines now. >> have you turned down $3

billion from anyone to buy yet? >> no, sadly not. not yet. >> keep us updated. >> we will. >> john, one quick final question for you. since you've created the list at business week about mbas. >> in 1988. >> your list today is about the outliers, the big winners. is getting an mba today worth it mathematically? >> yeah, no question about it. you know, the employment rate for mbas in the class of 2012 in september was 95%. >> wow. >> which is unbeatable. think about how that compares with law school where we know there's an incredible crisis. and it's hard to find a job if you graduate from law school today. it's not true with an mba. >> john, thank you for that, appreciate it. little secret, i was john's intern 1996. >> yes, indeed. andrew, take care. when we come back, we're going to have more of the

morning's top stories as well as some picks. ♪ [ laughter ] ♪ [ female announcer ] each one of us is our own boss. ♪ and no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. ♪ can help you take charge of your future. but with less energy, moodiness, and a low sex drive,y first. i saw my doctor. a blood test showed it was low testosterone, not age. we talked about axiron. the only underarm low t treatment that can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women especially those who are or who may become pregnant

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it is stock picking thursday with super mario. guest host mario gabelli tells us why he thinks his stocks will be winners. looking for deals this holiday season? >> can i show you something? >> i was just browsing. >> early hot deals may be great for the consumer. >> wouldn't be the christmas shopping season if the stores were any less hotter than they are. it is warm in here.

>> bad retailers and that leads to blurred lines for investors. >> can't see the line can you, russ? >> nope. >> our retail round-up is just ahead. plus, what investors should take away from the fed minutes as the second hour of "squawk box" begins right now. >> good morning and welcome back to "squawk box" here on cnbc. if you can hear what's said during the commercial breaks, i'm andrew ross sorkin and becky quick. we do have green arrows, dow looking like it would open up about 40 points higher, nasdaq close to eight points higher. it is a big morning for retail earnings with investors looking ahead to target's quarterly release. that's coming a bit later. sears already out, reporting an overall loss of 5.03 per share.

and when adjustments made, the loss comes out to 3.13 per share, slightly smaller than expected. revenue, however, was below estimates with same-store sales falling at both sears and kmart. yahoo saw strong demand for the five-year convertible note offering. so much so it increased the size of the offering to 1.25 billion. anyway, chrysler -- anyway. chrysler has added four banks to help underwrite the initial public offering. goldman sachs, morgan stanley and ubs, according to reiters that says the automaker could go public as soon as december and that's a turn around story. >> in auto news, consumer reports is out with its car owner satisfaction ratings and taking the top spot, the tesla model s. owners giving the luxury all-electric car 99 out of a possible 100. that's the highest owner

satisfaction score consumer reports has seen in years. good news for tesla, which has faced some increasingly tough questions after several car fires over the past few months. launched a safety probe into the model s. phil lebeau caught up with the head of the national highway traffic safety administration late yesterday about its investigation into tesla. >> once we made that decision and talked to tesla about that decision, they were more than open about saying we want the highest level of scrutiny, we want to cooperate with you at every level of this investigation. they feel strongly about the quality and safety of their vehicles. we have a lot of questions to have answered and the fact they're willing to step forward to the plate and be collaborative is a very positive thing. >> and tesla shares are well off their highs. but you really, you know, andrew you interviewed this dude. >> yep. >> you see an s.

and i used to think, wow, is that a jaguar? what is that thing? >> it's an incredible car. >> it's not just the shape of the car. they did things like steve jobs. you know, form follows function or whatever the old, you know, architectural strategy. the guy is like jobs to come out of nowhere. gm and ford and all the others they've been trying to come up with this for so long. i see what he's saying. if you've got a gas tank with 30 gallons worth of gas and you're in a bad accident, that's scary. but then there are these batteries, apparently -- >> and the distributor -- >> distributed across the whole bottom. does any little, you know, does any crash -- >> consumer reports comes out and says it's the safest car they've ever tested. >> this is interesting. we'll see what kind of conclusions these -- and you know, when you test cars, you see those, you know, crash dummies and stuff. you see how hard -- and it's scary to watch because even 35

miles an hour. >> are they really smashing up teslas, though? >> it's only the government, we can afford it. >> consumer reports. >> consumer reports. >> but when they test. >> yeah, well, they, i'm sure are. >> money to burn. who cares, we'll talk to janet yellen. they don't care. our guest host is known as a value investing legend. joining us this morning is mario gabelli. and thank you for being here today. >> it's always fun to talk about stocks. >> it is. i know you're not a macro guy, but you are a value guy. when you look around and see stock prices have come, is it harder to find values? >> well, you look at the dynamics and have to have a vision as to what the economy is going to look like in 2014 around the world, what's it going to be like in 2015? cash flows will be helped in 2014. corporate profits, even if they were constant, they don't have to put as much money into pensions. more fully funded, discount rate

is not going to go down any more, it's going to go up. and the markets lift to the asset value. you don't find the same margin of safety in stocks but you can pick them. i have stocks that will double in the next five years, 13%, 14% compound return. but mark to market, they'll have a hiccup at some point in time, which is terrific. >> i want to talk about some of the stocks you see. before we get to some of the specifics. >> no, in terms of the macros over the next, you've got 24 days till christmas. you've got 20 odd days left until the end of the year. window dressing, you have to think about what happens in the middle of january with regards to the debt ceiling. >> what does happen, how does the market react to that? >> well, clearly, you know, will we have a compromise? will we fix it for the next two years? the market's on a wait and see. we patched, kicked, will we fix, we can't fix in a month, in terms of the structural deficit. give a little give and take.

how is the market going to react if interest rates go up. i remember in the '70s and '80s, volcker would come in and change the game. will yellen do something different? >> but volcker-esque. >> exactly. >> she's been the one orchestrating this whole open communication. >> agreed. >> she wants to get elected, nominated, i mean. there will be a surprise. what is the surprise in 2014? will it be saying i can't trust somebody else negotiating my country security? will it be some other political dynamic? will it be terrorism? there's no margin of safety necessarily in the broad market but stock specific -- >> but is the fed doing something that covers up a lot of problems with companies at this point? carl icahn said this week or last week when he looks around, this is the liquidity driven market and all of that is covering up for poor management. >> well, you know, there are 90%

of the companies in the united states, the ceo comes to work every day trying to figure out how to increase the intrinsic value. driving profits and helping the stock price. yeah, there's always 5% or 10% of those that are just laid back. and we have several of those. in fact, management changes. management changes are an important part of a catalyst to drive values. for example, federal mogul, he changed management. those are important elements. notwithstanding that on a global basis, there's some really easy ways to look at business. the rising middle class of china and india. enormous, high propensity to travel as they increase the gdp. and real disposable income. so there's a great runway for commercial aviation, which we've talked about when i was on last time. and we just finished a conference where airbus presenting and boeing is coming out of dubai and looking at their ship set deliveries. >> do you like both airbus and

boeing? or is there one you pick over the other? >> well, i like the vendors of both of those. i have no problem with them. we talk about the big puppies, the airplanes, dream liner and a350 and so on. but really the 737 and the a320, you have a great ramp-up in production and the whole vendors are going to do well and you're going to now -- >> who are some of those vendors? >> well, the companies, kman, companies that supply parts, there's an array of them that can do well. part of them are also tied to military and sequestration, round two could have a hiccup. at the same time, the japanese are likely to kind of -- going to start spending more on military expenditures, more money spent on in the middle east. you'll have a navy, the saudis are looking at something to do with their own navy. >> have the japanese spent

anything on military in -- since world war ii, really? >> i think it's a small part of their gdp, but clearly they send some fighters over the islands. they send fighters over the islands. the point is, there's an opportunity. and if we can neutralize sequestration. meanwhile, the defense stocks which everyone thought would do poorly. everyone thought would do poorly in 2013 would be brilliant even with the sequestration. >> well, i'm looking at the vendors to boeing, particularly commercial aviation. the part that's missing is the private aviation market. and there you can have a wild card with regards to the military and china. will they open up the air space? and they're going to have to. they'll open up the air space. >> well, you have it, not as much as here. >> how long have you been playing that? >> that's probably only been about two years. i'm not playing that. cessna dropped from $25 to $9. and it's back to 30.

and demand for private aviation has not picked up. >> how many people -- there's a lot of people in china. how many people could -- since there are so many, even though the percentage is lower who could afford a private jet. how many individuals you think in china could afford a private jet? >> 600. >> 600 what? >> 600 families, 600 people? >> is that all? >> no, if you increase demand by 600 or 1,200, you're only going to sell 1,400 -- they're only selling 1,400. >> how many could afford a private plane in china? >> well, the forbes 400, joe, in five years are going to be asians. >> right. my point. so it is -- it's funny because -- there are people over there that aren't just like wearing the -- people that aren't communists. >> if you want to fly from shanghai to -- >> isn't he a billionaire? there's billionaires.

>> when you talk to warren buffett, ask him. >> aviation in china is going to -- >> at some point in time in the next five years, it's going to accelerate. it's going to do as you try to move and time is money, you have to go from point "a" to point "b." >> on the cover of "fortune" magazine this week, they had a big story about how china's trying to build their own aviation industry. >> well, there's no question -- >> does cessna boeing or air bus win that game or gulfstream or somebody else? >> well, they're a large aircraft. and when you think about boeing and the dreamliner and the learning curve and airbus. and the chinese are going after the single, that will happen. there's only two or three engine manufacturers in the world, rolls royce, ge and whitney. >> that's where you'd make the investment?

or in the? >> we are basically doing the following. what's going to happen over the next three years in terms of vendors to boeing and vendors to airbus. and which ones have staying power. i would own rolls royce today, not the car company, the engine manufacturer. i think you're going to make 50% to 100% in the next three to four years. i think you're going to have significant returns as companies have taken over in this industry. flatten out sequestration so the military portion of some of their businesses hold up. and then you've got industrial gas turbines. don't forget you have natural gas sells at $3.61, and you basically have money moving into industrial gas turbines in the country. >> can you just buy ge and throw the rest of your crappy stocks away? >> joe, don't talk about my portfolio that way. maybe your portfolio. and i'm delighted you're also buying comcast. >> only thing we can buy. >> we own ge. i thought jeff had a challenge

with regard to the capital structure. he's migrating, selling off a piece of the commercial of the consumer product. ge at 26.80, wherever it closed yesterday. will he do financial engineering? probably not, but they have very good industrial products, a good dividend, they're buying back stock. it's not -- it's got a $220 billion market cap, what is it 10 billion shares at $27? my advice is to ignore the unloved, including andrew and joe. they're unloved but we still like them. >> thank you. >> i'm glad you're here for the next couple of hours. >> i've got to keep them busy. >> keep them on their toes. >> within that framework, you know, where is china going to go? their one-child policy and looking at that is an example of where they're trying to drive consumerism. >> right. >> clearly, and so those are some of the other issues. and i think northern europe will

do at the margin increasingly better as well as southern europe. >> all right. we're going to talk a lot more about this. we do have mario with us for the next two hours. he's our guest host this morning. up next -- yeah, it's me. since the passage of obama care in 2010, health care stocks have outperformed the s&p 500, up 75% compared to about 50 for the s&p. will that run continue? amid website glitches and policy cancellations. did you read -- there's an "s" in that i saw 50 to 100 million corporate plans in the next year are going to fall by the wayside from obama care. we'll shine the sector spotlight -- according to a study -- we're going to put the spotlight on health care stocks.

health insurance stocks have been performing quite well despite all the confusion surrounding the debacle that is obama care. will the sector remain hot if problems persist? josh raskin at barclays. let me summarize what i think you're saying. that with a lot of individuals losing initially there was the thought that could affect insurance companies and the president said, all right, we're

going to allow another year for some of these. did that actually help the stocks because people thought they'd be able to keep some of those canceled plans? >> sure. thanks and good morning. thanks for having me here. in terms of the rescissions getting rescinded again, i think this is actually a slight positive for most of the health insurance companies. the way we're looking at it is the margins and exchange based products are probably going to be a little bit lower. additionally, the insurers have more flexible off the exchange right now. so to the extent they can keep those members and not have them transition into lower margin and, you know, less attractive benefits in the exchanges, that's actually a positive for most of the health insurance companies. >> i thought that it's still up in the air how many state insurance commissioners are going to let it happen. it's unclear whether the company -- >> 20 have said yes so far, 5 have said no. >> and how many have the companies themselves have the ability to go back to what they thought they weren't going to need anymore and they designed

all these new things. is it feasible that what percentage will be able to keep what we thought was canceled. 50%? >> yeah, it's a good point, you know. if you saw the lobby organization for the health insurers. they said they're not sure if it's a good idea. and if you're going to change the rules with a month and a half to go before the exchanges open, there's got to be other concessions to be made. to your point, the health insurers are not exactly sure what exactly would be, you know, in the best interest of the industry. you know, some of the estimates were about 5 million or 6 million people would receive those rescission notices. i think 2 million got them in october. you know, at this point as you mentioned, a lot of this is up in the air. >> joshua, if a lot of small to medium sized corporations decide they're going to allow it'd be easier to pay the penalty and let their employees go on to the exchange, that would help -- these private insurers that you cover are on the obama care

exchange. so they'd get -- they wouldn't be losing the employer coverage because they'd be gaining it on the other side because they're in the exchanges, right? >> yeah. >> it's not a net negative, is it? i've seen estimates at 50 million to 100 million people that are going to lose it that aren't individual plans, they're in employer sponsored plans that are going to go away. >> yeah, my first instinct is that 50 to 100 million is way too high. you're not going to see that. in the short-term, almost no employer dumping. and the reason is because none of the employers believe there's viable options for their employees to buy in the exchange. >> their plans they are in right now aren't up to snuff on what the government is going to require them to cover. they're going to have to change something. >> right, there are some changes that will be required, you know, off the exchange in a small group and not really in the large group but more in the small group market. over time, there's chance to see migration from small group into the exchanges. that would create some market share shifts certainly because,

you know, our expectation is the plans that are the most attractive and exchanges are not necessarily the ones commanding the largest market shares today. >> josh, what are you not buying and what are you buying in terms of stock specifics given that overview? >> i think the market had this wrong for a couple of years they thought obama care was going to be a huge negative for the health care companies. broadly speaking, i think the industry starts to thaw in terms of multiples. i think you'll see appreciation in the broader group. the names we'd stick with were names like united health and aetna where they've got significant market share off the exchanges and there's not much risk in terms of participation on the exchanges. the interesting names are the names like senteen. they've got a lot of tail winds behind them from a revenue perspective. and if they can maintain even very modest margins, there's a huge opportunity for smaller companies, as well. >> can you help me out? when you were talking about how the margins and exchanges were

lower margins, what the companies are dealing with existing plans they were told to cancel and told to bring back. is that because the insurance companies are greedy and have higher margins in these plans? or because the people in those plans, they actually are healthier people who don't get sick and don't use the benefits? >> yeah, i think the insurance market functions like insurance off the exchange. there's underwriting capabilities, et cetera, so the health plans can underwrite the products and, you know, earn -- when i talk about better margins, you're talking about single digit numbers here. on the exchanges, there'll be adverse selection, for sure. some of that will be mitigated by reinsurance and corridors. it's very difficult to create pricing differentials when everybody sees the exact same numbers when they go to the website on the exchange. >> all right. all right, thanks. united health care and aetna. all right. see you later. thanks. when we come back, steve liesman reads into the fed minutes. and when it dials down into

their easy money policy, he'll tell us when that may be coming. plus, big savings around the holiday season has been a huge selling point for retailers. but this year, seems that retailers are pushing it much earlier than usual. courtney reagan has just that story in a moment. your grass waters itself. your dishes wash themselves. so why don't your floors... ...clean themselves? the irobot roomba vacuum cleaning robot.

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when we come back, we're going to read into the fed minutes. steve liesman is here and what markets should take away from the minutes. qe is here forever or not. no script today? >> stay tuned. and then the retailers pushing early sales, they could be in for a christmas surprise. "squawk box" will be right back. broken immigration system, r there are signs both political parties in washington get it: washington is lagging behind the country on this... ...this issue has been around far too long... and yet, we wait. reforming our immigration system would dramatically reduce our nation's debt... grow the economy by 5.4% ... and take bold steps to secure our borders. on this, both parties say they agree: democrats... we are very very strongly in favor

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. welcome back to "squawk box" this morning. we've got a lot of headlines, key economic reports ahead. why do you do the music that way? >> because you heard that one -- >> yeah. >> now let's do the other. >> what's the other? is there a pause? that's like a pregnant pause. >> we just did this one, remember? >> it's awful. >> they picked it. the same people picked it. all right. let's take a poll. >> we'll take a poll. >> do the other one again. the other one we did the other day.

>> there we go. >> that's you selling a vacuum cleaner on an infomercial or something. >> or a blender. >> and -- infomercial time. >> that's like a game show. >> these poor guys have to listen to this? >> let me tell you what's going on in the news. we'll get the weekly jobless report. >> do you think the same people picked that? >> we'll get the october producer price index which has been delayed. jobless claims seen falling slightly and economists expect producer prices to post a decline of .2%. later this morning at 10:00 a.m. eastern, we're going to get the latest philadelphia fed survey as well as the conference board's index of leading economic indicators, and then the senate banking committee, it's also going to be voting today on the nomination of janet yellen. she's expected, of course, to win approval, her nomination would then go on for the full senate -- to the full senate floor to get a final vote. we're also watching shares of

abercrombie & fitch this morning. however, the teen retailer also said it expected a same-store sales drop in the low double digits for the current quarter. >> target last time -- last time, but last time, i don't know. last time the analysts, some of them had something included, some of them didn't. the gap number's 54, the adjusted number's 84, and the estimate is in between at 63. to get an idea, the stock at this point now is indicated lower. it initially was traded higher as people were trying to figure out. >> it's higher than expected dilution related to the -- >> the revenue number's below. >> what's also concerning is if you look the the same-store sales, you talk about the comps. 0.9% was the comp store sales. they say this reflects strong execution in the u.s. segment. >> what do they mean?

what do they mean by that? below expectations as a result of higher than expected dilution related to its canadian segment. did they do something up in canada? they exit something? or -- >> related to the expected reduction and the asset. >> okay. so they're doing something with their -- the dilution was higher. i don't know if you would point to that as an operating miss, necessarily. >> what's more important is what they say about the consumer. >> the bid's down to 64.25, the ask is holding up okay at 66.19, but the stock does look like it's headed lower. >> what's amazing is they don't say much at all about the consumer. walmart came out and told us there were concerns and it was going to be a very high sales area for the fourth quarter. i'm looking through and trying to read through the entire release. >> here's a fourth quarter estimate, becky.

150 to 160 adjusted, the estimates 145. we've got the same problem, though. g once again, the same kind of fiscal year scene adjusted 459 out of 469. and i don't know, that makes no sense because it's only 3.86. so, we need -- it's a blended -- i think you use something between gaap and adjusted. >> steve, what were you saying? >> it was a note here. becky may have seen this already. results are e flekt continued strong execution. >> just one line. >> one line. >> all said about it. i'm looking through the rest of the results and talking about canadian and interest expense and taxes and capital return to shareholders and accounting considerations. they talk about just about everything but the strength of the consumer with the exception of that one line. in an environment where consumer

spending remains constrained. that doesn't give you a whole lot to hang your hat on if you're looking for the antiwalmart remarks here. >> but it reflects strong execution. >> strong execution and weak environment. and this is an odd release because normally the retailers will tell you a whole lot about what they've been seeing in terms of the latest trends in the stores. what's selling well, with what's not selling well. this is filled with accounting stuff and, you know, the u.s. segment results. >> here's the -- it's 29 cents for canada. what if you add -- >> owner of retailers right now? >> what if you add 29 to 54, what do you get? >> we owned macy's for an extended period of time, we did move a little bit at several of the others. but we own retailers that do car. o'reilly's part store. they sell parts for people with cars. >> you're scared of the big boxes right now? >> that has no relevance, andrew. think about o'reilly's.

why wouldn't you want to own it? it's got a market cap and there are big boxes. >> because of the earnings. >> that's true. but i'm focusing on what i'm going to make -- >> he doesn't have a car. >> that's true. >> that's a separate issue. that's a separate issue. >> these guys have -- there's 250 million cars on the road in the united states and they need repair work. driving the car and buying gasoline in new jersey at $3 a gallon or less, you have a do it for me and do it for yourself. you can focus on target. my target is o'reilly's, genuine parts and that's how we're going to make money with conviction. >> got it. >> all right. we'll continue this conversation but also the fed's minutes out yesterday pointed to a pullback on the fed's bond buying program in the next few months. that's what made the market sit up and take notice. steve liesman is here with more on how to interpret that. >> i don't have a script, what do you want to know? >> are we right to think it

could come as early as december now? >> i think december's on the table. i think the bar is relatively low. they used language they used back in june that made the market think it was going to happen in september. so we're within the realm they said it could happen in the coming months if the forecast turns out the way we expect. so that means accelerating growth. i don't think they can prove accelerating growth in december. if they get a really strong jobs report 200,000, perhaps. but right now the way the gdp forecasts are working, looks like you're going to do about a 3233 in the first quarter. and now i'm seeing 1.4, 1.5 in the first quarter. it would be hard for the fed to make that argument. they could do it if they wanted to. but it's not the most, you know, slam dunk argument to say, hey, the economy's accelerating, we're going to report a 1.4 gdp. >> how important is the -- so why could you do something until they get a better handle on what fiscal policy is going to be and

sequestration? >> the fed's political forecasting was better than the economic forecasting. what i'm hearing now is they don't think the next go round is going to be quite as -- what's the word, rambunctious as the last time around. in fact, yesterday, joe, they said they see the effects of the shutdown as temporary. >> what effects? >> the effects such as they are -- such as they were. as temporary and not -- >> so does that mean -- >> they didn't say severe but they didn't see -- and they also had an emergency meeting. >> did you appreciate this headline in the journal? >> i saw the one you were talking about. >> that was the earth shattering news from yesterday? that they do still plan at some point to stop the bond buying? >> they do.

>> were you heartened by that it was not going to be a permanent program? >> i don't have an opinion either way. but i think becky's right, it's a small space and we writers, joe, over the years have learned to blame headline writers. all of the problems that -- >> i was never -- >> 20 years ago when becky was eight and started covering the retail beat for the "wall street journal." >> i did not start 20 years ago. >> 15 years ago. >> mmm -- >> she was 8 when she started. 8 years old and she was covering the retail. two cubicles down from me used to tell me about what was going on -- >> steve was covering the economy and i was covering the retailers. those overlap. >> are you okay with -- you didn't have a script. >> no script. >> because of the amount of coffee i needed this morning to wake up. can i ask mario how much it matters, mario? how much are you thinking that stock market is levitated by

bernanke and the qe. >> there's no question there's a sugar high and it's dealing with the policy a year and a half ago when he was in jackson hole saying i have to reflate stock market and housing market and it's worked. the market is a function of earnings and multiple. you're seeing okay earnings and increase in multiples. now you have to maintain earnings in 2014 if baucus can pull it off and have a reduction in tax -- cut in the corporate tax rate, that's going to add nicely to the cash flow and earnings of domestic companies. and in addition to that, if interest rates trick up as they are, they're up to 279 today on the ten, you'll have a little head wind on the multiple, but the earnings will offset that. >> you're an opportunist. you're bottom up and top down. you look at all sides of it. >> we don't buy -- we're not buying etfs. >> you view world and valuation. >> you can't ignore the world

and you have to go in and pick stocks specifically. been doing it for 35 years. >> just real quick. back to target. it's really down now. and did you see this stuff? they're now saying that fact set was using 54 cents versus a 64 cent number. that's 10 cents shy. now for the next quarter, 150 to 160 is actually above the 147 for the next quarter. however, for the year, for the year, it reflects 459 to 469, but that's probably because of the 10 cent miss in this quarter. >> again, i can't remember ever seeing a retailer. >> but looks like it's down 10 cents. >> never seen one on accounting on segments, on different things and doesn't mention the consumer. >> they wrote off a lot. >> a lot of weird stuff going on in here and don't say how the consumer is doing, what they're going to do in terms of competing with walmart and the deep discounts in the fourth

quarter. they don't look at the basic issues you would judge a retailer on and this accounting stuff leaves a lot to be desired. >> they wrote off a lot of excess inventory in canada. are they adding more stores in canada? >> it's that confusing. i understand wanting to explain this. but you didn't give us a whole lot to go with. and this is a little unusual. >> fourth quarter they didn't lower. >> but for the year. >> they have a call coming up this morning? >> yeah, they do. >> trying to explain some of this. >> hopefully you'll get more information on this. >> maybe they figure it's not your problem to tell you about the consumer. >> well, if that's what you're giving me, this is a mess. and if that's your explanation, i don't understand what's happening in canada. >> we'll try to decipher some of this if we can. in the meantime, though, coming up next, increased promotions could provide an early preview of this holiday shopping season and courtney will be here with that story next. we'll talk to her about target. also, programming note tonight, catch the season finale of

"american greed" the fugitives airs at 10:00 p.m. eastern and pacific. "squawk box" coming back after this. bny mellon combines investment management & investment servicing,

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welcome back to "squawk box." early promotions a gift for consumers, but could be a slippery slope for retailers this holiday season. courtney reagan joins us with more. we also want to talk to you a little bit about target, as well. >> let's talk about these margins first. shoppers count on, but this year, the discounts are deeper and the promotions are running longer than they have in years past and retailers could be paying a hefty price in the long run. naturally the further the prices slash, the smaller the profit. discounts are a necessary evil to win sales and traffic. but it also trains the shopper not to buy at full price. so far, even the stronger retailers are coming up short. of the retailers, macy's has probably issued the strongest earnings report and guidance so far. share price was rewarded for the sales growth. gross margin did fall. and a drop in merchandise margin. the key is that macy's reined in

the expenses so the bottom line got a cushion. if it's upping the promotions gain, you know jc penney feels the pressure to double down. it's got to pull out the stops to win back that sale-driven shopper. he says, he's, quote, not giving away merchandise, adding the discounts are no deeper than they were in 2011, remember that was when we had the comparable promotional model. later said in some cases jc penney has had to sell items below cost to clear merchandise brought in by ron johnson that hasn't been well-received. that doesn't help profitability or lack thereof. now, jeffreys says it's tough for almost all apparel retailers to drive margin expansion right now with heightened promotions ahead of the holiday. that's just going to be the new norm. >> what is the -- i haven't been to a jc penney since the sort of transition. i was there under the -- under the ron johnson transition. what's it like now walking around? >> it depends on the stores,

different sizes, different formats and different cities feel different. the one in new york feels different from the one in dayton, ohio. i send my mom, she's my secret shopper. last night she got on the phone with me and said you know what, it doesn't look so empty. last time i was in there, felt like they were going to go bankrupt any second. there were completely empty parts of the store. she says it's more clear where things are. so it does sort of look much more like the old jc penney. the floors are fuller, they've got the center aisles with the displays, big sale signage. all that stuff -- >> and changed the merchandise. >> they have, again, which is a really hard thing to do. >> we should talk about the stuff that's happening right now. >> sure. >> target and dollar tree out with concerning comments, as well. is this the beginning of the end for the holiday shopping season when you're talking about the low-end of the market? >> it's really, really hard. and we sort of laid out the naughty and nice factors a couple of days ago. and it's sort of hard to tell how this is going to shake out. weird combination of head winds

and tail winds. but the low-end consumer is struggling. jobs and job stability is very top of mind. the reduction is going to be huge. that's going to hit walmart, the dollar stores. target maybe but not as much as probably walmart or dollar stores. i think there's a lot of concern. >> cash would help, eventually. >> it hasn't. >> but just recently got down to what? >> if you save 40 cents a gallon, that's $40 billion after tax going right into consumer spending, it's not a big number, but at the margin it's psychological too. >> the health care costs, you know you have to make the first payments before -- right around christmas if i know the dates. so you anticipate the big spending you didn't have before. >> dollar tree too, though. that stock's down. >> you have tens of dozens of people -- courtney, tens of dozens of people dealing with that. >> tens of dozens? >> they were able to get the new insurance, right?

>> that's true. >> talk about confidence and sentiment, it doesn't make you feel good about what's going on. you don't know what you have to pay. all of that makes people very uncertain if you don't have a lot of money to spend, you don't know if it's going to be gone. >> it goes to the corporate office as well as their shopping in terms of deals. same thing. >> ghost towns, dayton at the malls, cincinnati is so frightening. empty, stores they can't get tenants. >> on big days like black friday, i'll be there and the malls are super, super packed. but it takes a very -- takes something very, very -- >> no tenants where i lived in cincinnati. and the anchor tenant, the jc penney or target -- how about commerce, going to be a big season? >> yeah, double digit there. >> terrific secular growth. >> still to come this morning, we're going to take a closer look at small investor, banking and the fed. td ameritrade cfo joins us when

we come back. up next, what's working for mario? >> i have stocks that will double in the next five years. >> we talk value investing and names you should be buying. right after the break. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

let's get some top picks from our guest host, gamco investor's chairman and ceo.

you're a busy boy. >> well, you know what, we look at the ignored and unloved so you have to travel a lot around the world and find good ideas. and you know what, the harder we work and i've got a great team. portfolio managers, some of you who you met. >> yep. had them on the air. >> absolutely. >> in that regard, we like financial engineering, subset of that, andrew, is a shrink. time warner, down 50%, secondly, newscorp dropping stock, viacom shrinking substantially. recovery, each of these stocks because of the rising middle class around the world and the notion of having that mobility in their hand and want content, you'll see the stocks double. >> hold on, time warner. >> i like all four of them. >> newscorp, viacom and discovery. >> they'll all crumble. >> okay. >> in five years -- >> cbs?

>> i like what he's doing but for a different reason. in the broadcasting area, like consolidation, media general which has already tripled this year will again double in the next three or four years. >> media general's going to double. hold on, now we've got five. >> oh, i give you more. >> these are all going to double. time warner, newscorp. >> total return of 14% gives you a double in five years. so combination of dividends and cash flow and the stock prices in part driven by the use of cash flow to buy back stock. another one, when a management change, you talked about ohio. i'll give you one from akron and canton, ohio. a management change. this is no long you are your grandmother's security company. things you want with regard to cost reduction and a management change. has 63 million shares sells at 33. and essentially if they pull it off five years from now with the earnings we look at you can see a stock and total return of a double.

in this market -- where the market may not do anything for 33 years, there's a lot of significant companies. i think genuine parts will give you a 14% for five years. you're marking to market daily, you're not going to feel comfortable during time periods like this. >> let me ask you a couple of questions. i want to go back to time warner and newscorp. do you need to break. some people have talked about whether you want to split up hbo, put that aside. do you have to do a lot more at each of these places? >> the model that they're following is simple. can we -- given our revenue base of subscription revenue, grow ebitda and take the incremental ebitda and take the leverage that we go and buy back stock? and it's not complicated. >> have i been pronouncing it wrong? how can you know about the company if you can't say the guy's name? >> stop. he doesn't know how to say

gabelli. >> les mundes? what? it's les moonves. >> i like the cable business. ilike what they're doing. >> we're going to go to break now. >> thank you. >> thank you, sir. >> i know not to bite the hand that feeds me. steve burke -- when we come back, we're going to welcome back bill gerber for the remainder of the show. "squawk box" will be right back. it's estimated that 30% of the traffic in a city

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warp speed. ♪ return to the retail investor, with indexes up 20% year-to-date. we'll ask the cfo where individual investors are putting their money. saying healthcare.gov runs on code that is inefficient -- >> by looking at the website, we can see there's fundamental security principles not being followed. >> we'll talk to a cyber security ceo who says he wouldn't put his family's personal information on that site. plus, celebrities on the attack. we're going to tell you why

ashton kutcher and kanye west have a beef with walmart and zappos. the third hour of "squawk box" starts right now. ♪ hit me with your best shot ♪ hit me with your best shot fire away ♪ >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernan along with becky quick and andrew ross sorkin. u.s. futures up about 50 points, that's where they were. so the news from target and dollar tree which i don't know whether we -- i guess we throw it in the walmart camp, don't we? not in the home depot camp. >> not in the home depot camp. there are big issues happening with the discount retailers and that's played out in earnings to date. let's walk you through some of the earnings that have come out that have been disappointments. this is why the street is acting this way. this is a walmart camp, no one's been able to distinguish themselves from what was happening with walmart talking

about concerns with the consumer, talking about how they're offering a lot of discounts to try to get people into the stores. none of that adds up to good news. take a look at shares of target this morning, the company came in with third quarter profit of 54 cents a share. this was on a gaap basis. this is kind of a mess. a lot of moving parts going through it. probably the bigger concern when they started talking about comp sales. that's a little disappointing. if you take a look at what they're also saying about the consumer. they didn't say much at all. they did say it is a very difficult environment out there. they say the performance is related to the dilution from the canadian segment. but again, take a look at shares from target. it did not do that today. that stock is down by just over 4%. abercrombie & fitch. they came in with numbers that beat estimates by 7 cents with quarterly profit of 52 cents a share. but they also said they expect to see same-store sales drop in the low double digits in the current quarter. abercrombie & fitch the teen

retailer. and dollar tree as joe mentioned, missed estimates by 2 cents. revenue was also a little light of conconsensus. they said a very cautious consumer environment is what they're looking at out there. they said the numbers that did come in, they had new customers coming in, new traffic. increased customer traffic. >> creamed. >> what you saw from both sears and target there was a lot of moving different pieces. they lost 15 cents a share for the third quarter. that was a little smaller than the 3.39 that analysts had been expecting, but revenue was shy of estimates here. they are spending more money on the stores and that's going to cost them over the short-term to make those investments. that stock's been under pressure too. it's a big story taking a look at the consumer.

how healthy the consumer is, particularly at the discount retail end of things. >> all of the casual dining was last month. you know, that would help to have that. and not just retailers. >> now, then you heard macy's. >> macy's -- >> they were doing great. >> an outstanding company. they talked about how they saw the trend improve throughout october. >> is this a real macro move? >> i think the low end is getting hit, getting squeezed. you can write that off to the affordable care act, a lot of things. >> see nordstrom's? >> that's going to be something the fed watches carefully. they're looking for data and this could play into that, as well. >> nordstrom, i don't think nordstrom has reported yet. i don't think -- i don't think nordstrom has reported. but if you look at the chart, it has gone from six -- it's been in a slow little decline on the very right-hand side of the

chart. >> some have suggested even though it's in the same category is considered the upscale -- >> right. >> even though -- >> but you are talking about the discounters on a broad base. on a broad basis. then you see abercrombie & fitch, a teen retailer that's a little higher. >> totally different. >> they've had an -- >> i'd like to know casual dining. i wish they were doing it. it's been a month since. and we're really talking about what's happening. our guest host for the hour is here to give us a read on it. bill gerber, a member of cnbc's global council. raked in record revenue and the stock is up more than 17% so far this year, which, i asked bill off camera and he said it's really management. the ceo and the cfo basically responsible for it. really? >> yeah.

you might as well. >> if it goes down. >> so have you -- one thing we've been talking about a lot is do the stock prices of the social media companies reflect a froth that's been nowhere to be seen for the past five years? seeing that you deal with retail investors, are you seeing evidence that is true? that there is some froth? or are they back a little bit at least? >> well, we believe there's a little froth in there, absolutely. when companies start getting priced again on revenue versus earnings. >> but what about the phone call. not just your opinion about whether the stock's cheap, are you seei ining anecdotally incrd activity, customers coming in. do you have a broker of the day? >> no, not as much. >> no? >> no, we don't see the long-term investor is really not back yet. >> they're not back yet. >> they're not back yet. we are seeing the people who are

active who stay very active. but the longer term investor -- >> no uptick at all yet? >> it's very little. >> what do you think of that? >> it's very little. >> we've been talking about this for a long time. >> there's two kinds of people. the people that got burned so bad that were in the market, in the 50s and 60s. they may stay out and young people who say this game's rigged from the start. >> well, you have to remember that roughly 16% of our clients' assets are in cash. so therefore 84% invested. it doesn't mean -- >> how does that relate? 16%? >> that's actually pretty normal. normally it's between 15% and 20%. >> what percentage of individual equities versus funds? >> equities is probably 60% to 65%. >> individual? >> yep. >> and the rest -- >> yep. >> that's different than i would have thought. i thought there'd be more money. >> these are your existing clients. what metric do you have that lets us know whether you're getting more clients. whether more people are coming back in to deal with td

ameritrade? what number would we look at? new accounts? >> yeah. new accounts and funded accounts. >> where are we on new accounts? >> that's up couple hundred thousand in the last year. so we are seeing -- we continue to see an expansion. we're probably doing -- >> you weren't as big a player in the late '90s, right? >> correct. >> so we can't use that. in a rip roaring time, what do you think you'd be adding a year? >> it'd probably be at least double that. at least double. >> and you think that's what's keeping people up concerns? >> there's certainly a lot of -- washington, we continue to hear from our clients, washington's dysfunction. we get the debt relief and the debt relief is for 90 days and we'll have another debate coming up in january. and you know, people want to see a long-term solution before they're willing to invest their money more longer term. we're all in favor of a long-term solution as a company and we're really looking forward

to hopefully getting something more than a three to six-month respite coming this month. but the issue we have, of course, is that we're not hearing anything in terms of debate, discussion going on in washington's never really been known to be a place where it's quiet and things are going. >> it's 2 cents above, it was back on the 14th, revenue was a little bit light for nordstrom and then for the outlook, they went -- they took the low end up to 3.65 from 3.60. so it wasn't anything that noteworthy. probably more like macy's, i guess. and that goes in what we've been saying it's the low end. >> it's a tale of two economies at this point. >> right. >> and that has to be really concerning from the fed's perspective. >> goes back to -- this goes back to what we were talking about in the 6:00 hour, right? >> which i've been harping on for months, income disparity.

>> and raising the minimum wage. >> that's the issue. and the fed, it's working for some, not working for others. >> yeah. >> and what do you do about it? >> we'll continue with that government program which is increasing the income disparity. and the progressives, their answer come up with another government program to take care of the income disparity from the first government program and if that didn't work, we'll do a third one. >> the question is if you stop the fed -- >> yes. >> does it hurt everybody? or what happens? >> why isn't the wealth -- >> where is the wealth effect? >> the wealth effect is at nordstrom's or macy's. >> in terms of jobs. in terms of jobs where is it? >> even worse off? >> could be. >> do you see something like this? do you see a split? a divergence? and is it harder to attract certain customers? is that why you're missing a couple hundred thousand

accounts? >> i don't think so, becky, there's a wealth effect, there's been two economies to a great extent for a long period of time. >> people have assets and people that don't. >> are stocks as widely held as they used to be? >> probably as widely held, yeah. >> but depends on how you hold them. might be -- >> could be 401(k). >> mutual fund. >> right. >> i don't think there's many people that are just pouring over the stock prices in the "wall street journal" anymore and picking stocks and, you know -- glued to the tv set to see what the -- and that -- i'm not saying that's -- except for the show, "mad money" and stuff. and that day hopefully is not gone. i just think this is a reflection -- jim paulson every time he comes in here. >> it's a generational thing? >> but the first part is you have to get rid of the idea the world is going to end again. and after five years where it almost ended, there are still some people that are ready for too big to fail 2 which is what

you were hoping for for your residua residuals, right? do you want to do the sequel? >> of course. >> we'll be the last to know. it'll be published before we hear about it. >> that's not true. there's no sequel coming, as far as i know. >> you're right, it is the stages of getting over a massive loss like that. it takes a long time to feel comfortable yet. >> all right. thanks, bill. we'll have much more. >> looks like -- >> it was a good reaction. >> more throughout the -- that's a good one. we'll have more. >> there you go. >> okay. here we go. coming up -- you want to react? >> nope. >> tech experts told congress this week that obama care website is cumbersome, nearly 25 times amount of code as facebook and, yes, it's vulnerable to an attack. a ceo who advised to scrap the website and start over. and we'll have "squawk"

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welcome back. cyber security experts were called to capitol hill earlier this week to testify on how vulnerable the obama care website is to hackers. morgan wright told congress that the code base for healthcare.gov is so large that it's going to be indefensible. good morning to you. >> good morning, thanks for having me on. >> morgan, really, how bad is this? >> we're accused -- we didn't want to spread fear, uncertainty and doubt, but as technologists, we're up there. quite frankly, none of us from a professional standpoint would ever go against. this is our opinion, it's not secure, we would not put our family on it. we wouldn't tell anybody to get on it. not at this time and not in the near future because there's no plan to fix this. >> oh, and that's where i wanted to go with this. so obviously the site needs to be fixed simply to make it work from a practical perspective but

then there's the security element. >> correct. >> your sense, to make this site secure, what would you have to do? >> you know, most of us felt you got to start all over again. we need health care 2.0. because the example i gave is back in the 80s we built an embassy in russia is when they almost got done with it, it was just filled with bugs and listening devices. and it cost us $130 million to tear it down and start all over again because it would have cost more to fix it than it would be to start all over again. and that's the position we're in here. there's no good way to fix this plane while it's in flight. you've got to put it on the ground. >> if i hired you right at this moment, it's 8:17 on thursday morning and i said how much would it cost and how quickly could you redo this whole site to make it secure and from the practical perspective actually make it work? what's the answer? >> you've got a better chance of seeing god because i wouldn't take the job. from a professional standpoint you'd say, no, too much risk involved. it's not doable.

you can't achieve the outcome you want based on the current structure. if your foundation is bad on a building no matter what you want to do, you build a skyscraper and there's cracks. >> i'm saying -- i'm giving you full permission to start. we can rewind the clock. you can start right now, though. i need to know how long it's going to take and what it would take in terms of cost. >> it would take people from the private sector, not government contractors. it would -- you can do this with a team of 25, 50 people and be done in less than a year. >> but that's -- you're right, this is a little different than tearing down a building on the ground. this is a plane that's in flight. >> right. >> how do you fix it now that we're in flight and you're going along and something that has to be done? i mean, you can't take this down, you've got people who have already bought in on this, lost their insurance who need to buy in on this. this is here, no undoing it. >> see, that's the political discussion we try to stay away. but to your point, becky, if it costs you $1 to fix it before it's lost, it'll cost you $100

to fix it off it's launched. the amount of code and inner dependencies, this isn't playing checkers or chess, trying to play 20 games of 3d chess at once. >> give me a comparable here. you look at a google through my gmail or apple, how much more or facebook or whomever, are they more secure than this? >> security is a relative issue. >> that's my point. the other sites are just as insecure -- >> no, not necessarily, guys. you have to understand in government systems, you deal with regulations that don't affect the private sector in terms of the information you can collect. facebook has been pulled before congress and had to testify about privacy. but in terms of a major breach of issue, they have not had that. they've had security or privacy issues. but they haven't had a major breach, neither has google. this site is primed to have a major breach. >> primed because you see the whole? you could hack it right now if you wanted to? >> yeah, actually, one of the people we had on with us, david kennedy, one of the hackers

clearly demonstrated to many of the systems already vulnerable and that it would be very easy at this point to take the site down. >> wow. >> yeah. >> wow. >> it's not fun news to have but, you know, bad news is not like wine, it doesn't get better with age. if we're going to address this, now is the time to address it, now is the time to -- >> what would be the cost to start fresh? >> that would be hard to say, but i can tell you this, it would be far less than the 600 million they've already spent and the potential billion or dollars more it's going to take to remediate and fix it. >> if we hired eric schmidt and mark zuckerberg to create this site. >> less than 100 million. >> we already spent 600, you think the whole thing should've cost 100, and now spending a lot more to get it right. >> yeah, the taxpayers will spend a lot. >> all right. thank you for joining us. >> you bet. thank you, guys. >> appreciate it. >> yeah. surprising though? >> no, not surprising. but sad.

coming up on a special "squawk box" edition of celebrities on the attack, ashton and kanye take shots at companies and a-rod loses his cool, andrew. you've seen the new kanye west video, i know. >> i heard about it. >> you've seen it. >> i have not seen it. >> you've seen it. you have seen it. >> i heard about it. >> and at 8:30 a.m. -- >> no, i have not seen it. >> and at 8:30 -- >> i saw there was an image on "huffington post." >> she's leaning back on his motorcycle just naked as a jay bird. >> well, i'm glad that somebody watched it. >> no, i've heard this from you. i looked over your shoulder. anyway, at 8:30 a.m. eastern, breaking economic data, we'll get the closely watched weekly jobless claims and the producer price index. >> you like that song? kanye's song? cme group can help you navigate risks and capture opportunities.

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right now it's time for a "squawk box" edition of celebrities on the attack. ashton kutcher takes shots at walmart on twitter yesterday. he criticized the employment practices tweeting, walmart, your profit margin is so important you can't pay your employees enough to be above the poverty lean. he later tweeted, you had $17 billion in profits last year, $260 billion company, what are we missing? well, the walmart news room twitter account responded and

made the retailer's case tweeting, we think you're missing a few things. the majority of our workforce is full-time and makes more than $25,000 a year. then also about 75% of our store management team started out as hourly associates and they earn between $50,000 and $170,000 a year on average. the exchange ended with walmart's newsroom tweeting we know we can always get a little better as a company. this year we've made providing more opportunities for our associates a top priority. ashton kutcher is not the only celebrity taking on a company. kanye west went after zappos using a four-letter word to talk about their products. this was presumably in response to comments from zappos' ceo that kanye should focus on music not on fashion. in is response to kanye's tweets, zappos posted a picture saying, yes, it is true that zappos sells -- >> s-h-i-t products.

>> that's right. >> you can say shih tzu, i've done that many times. that gives you -- >> i figured it was better to let you -- >> plausible deniable. it's a dog. >> it is a dog. >> don't need to worry about that. say it for me. >> shih tzu, it's a dog. >> thank you. also in sports news after 12 days of hearings, a-rod says he's heard enough of his grievance proceedings. alex rodriguez stormed out after an arbitrator ruled that bud selig did not have to testify in this process. a-rod is seeking to have his 211-game suspension for violation of baseball's drug agreement and labor contract lifted. today he slammed his hand on the table and cursed at the chief operating officer. rodriguez issued a statement through a spokesman saying he is disgusted with the process that is designed to ensure the player fails. he says he sat through the testimony of liars -- he says

there, he was trying to be respectful of baseball he says this can't happen longer. >> they point out that katie couric in 2007 asked him about roids -- not hemorrhoids, steroids, and he defiantly told her he didn't do them. and 14 months later, he was confronted with evidence he had failed drug tests years before. >> we are just a few minutes away from the october producer prices and that closely watched weekly jobless claims. stick around. we'll be right back. ♪

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welcome back to "squawk box." we have breaking labor data. the jobless claims number comes out pretty good at 323 from an expected 335. last week, however, was revised a little bit worse, 344 from 349. continuing claims a little worse than expected, actually, 2876 from an expected 2870. inflation data right on the number for month over month. it was expected negative .2, came out negative .2. food and energy came out plus .2. a little more than expected.

they're convinced there's no such thing as inflation right now. stock market lost, basically steady. came in at 2.8, the yield's gone up a little bit since then. edged a little higher. mostly a fairly muted reaction. this is not a bad number in the claims front. >> jim, steve's impressed with your report, not with the numbers. that was pretty cogent, was it not? >> have coherent is the word. >> have coherent. no script needed. >> no script needed. learn. i'm going to go to you now by reading the script. for more on the data, let's get to that -- >> don't ad lib. >> no, only would ad lib our viewers are writing in shtake mushrooms is a good -- >> for shih tzu, if you don't use shih tzu. there's no way anyone's going to get you for that. everyone's heard of those,

right? i came up with a good one. >> a cluster bomb. >> that works. >> no problem. >> give us your report without -- >> residential natural gas was done, gasoline down, heating oil down, all the energy components. jim is right, 0.2 on the seasonally adjusted core epi. the year-over-year, that was 1.4, the fed is not going to be worried about that. in fact, when you do what we do every month, we go up the chain of processing to less and less refined goods to see whether or not there's any inflation in the pipeline. and we see the opposite. intermediate goods minus 0.1% on the core minus 0.4% on the headline. unprocessed goods, we're going from wheat to flour to bread. that would be the final stage in the process there. and year-over-year minus 4.9. crude core goods. no inflation in the pipeline.

we talk about this every month, as well. these are relatively good numbers for profit margins. these are the inputs, producer prices into the stuff that is eventually sold to the consumer. so if these prices are going down faster than they're either going down or up at the consumer level, that means it's more profit for producers there. and the claims numbers, i think they're under control, i believe we're watching out. there was the california technical problems. we're washing out from the shutdown issues. and they're relatively well contained and suggests you could do another 150,000 to 200,000 on the month with numbers like this. if you remain down in the 320 level. and we're resuming the decline the levels before the shutdown. can i ask jim, jim, what's the forecasting right now on the fed? are you protecting yourself on december? or is that a belief or just sort of an option where you're protecting yourself? >> i actually am mildly impressed with what the fed has done over the last week.

and they've managed to put this notion of taper out there. i don't think it's coming in december. i do think long end rates will go up more as the fed keeps throwing out forward guidance trying to extend that zeroed out short-term period. so in a sense, what they're doing is saying we don't want to exploit our balance sheet anymore by continuing to buy a ton. they're going to continue for now, obviously, but what we want is the market to do heavy lifting. managing to stay net neutral on accommodation and plant the seed of taper. i don't think the tape -- >> the question is, have they made any progress in trying to get us to separate the notion of tapering is not tightening. and you had bernanke out there in full force. as dovish as i've seen a fed chairman on rates saying we may lower the unemployment threshold. we could hang out, we have time to be patient there. and by the way, he's talking about a time well after he's left office here. >> that's really interesting. it's proof it didn't work last time. they were going to be able to

separate the two. now he has to come and try and pivot and find a new -- >> unlike other parts of the government -- i want to make this point. the fed knows it has a problem. and if you read the minutes yesterday which i do not recommend to you because they're unbelievably complicated. but if you read them, they know they have a problem and they're casting about this way and that way trying to find some solution to make that solution. and bernanke's saying, you know what, we can remain low forever. >> you were going to say it didn't work the first time back in may. at that time, earn talking about a ten-year yield and never considered the notion of taper. that's been introduced. now we're a little more willing to handle that news. i think it's fine now. but, again, they can't be that transparent because then they run the risk of people front running them and selling the long end. so they have to be a little less transparent than they want to be. >> you mean volcker-esque, a quick move nobody's expecting? >> right. like what they did in september.

when they pulled the rug out of the potential shorts, i think that was slightly by design. they can't say we're tapering in march because then the market's going to front run them and they might be able to lose control. >> is the market desensitized now to this? is the market ready for a taper in the way it wasn't in september or june? >> i think it's certainly more ready than may. but anyway, go on. >> i would agree. >> absolutely agree. >> thank you. >> you're good at your job. >> fantastic job. >> good job, jim. >> no teleprompter no less. >> 95 years old, won two nobel prizes, only yesterday, one of only four people. one for sequencing proteins and am amino acids, 22 years later -- this is an in-depth obit in the "washington post." >> twice going -- >> usually they do their best work when they're younger. there's data on that. >> they said he was so modest --

>> you're 30 in some fields, you're done, to come back -- >> he worked ten years to sequence it and said he was so modest and unassuming thought he would be the caretaker of the lab he worked. i've got my eye on another guy winning another one. al gore. he's going to win another one. >> there's an interesting story about that, about people living and working longer is that they're keeping people younger from getting that first grant so they can do their best work in their 30s. exactly. people are not getting grants to do research at the prime of their intellectual lives right now. >> on that note. coming up -- what's going on? are we over? jour past th you're past that, right? >> i'm done, are you kidding me? >> mohammed el-erian will tell us why he thinks the fed is the market's best friend. plus, don't miss the season finale of american greed

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welcome back to "squawk box" this morning. check out shares of hlogic. is that how you pronounce it? >> hologic. disclosing the purchase of common shares the sale of put

options with a strike price on the options and analyst at rbc capital says icahn's involvement could accelerate and result in a quicker departure. >> hologic. >> thank you. a boeing dream lifter landed at the wrong airport last night. this is a weird story. one of the largest cargo planes in the world that landed at airport in kansas. it was supposed to land a short distance away. a recording of a radio conversation with an air traffic controller appears to show the crew members were still unsure of their location even after landing. >> where are we? >> there had been reports that the plane was stuck because the runway is far too short for the plane to take off. but earlier this morning an official with the wichita airport authority said that the plane was capable of taking off and will do so at 1:00 eastern this afternoon.

>> how does that happen? >> i don't understand how you land in the wrong place and not know you're in the wrong place. is the fed the market's best friend? that's what our next guest at "squawk" market master says. joining us now is mohammed el-erian. why is the fed the market's best friend? i know why it has been to this point. could it yank the rug out from under the markets? >> it will try not to, becky. the fed cannot get to its economic objectives without going through the asset markets. so the fed feels obliged to continue to support the asset markets, not in itself, but as a means to an end. and that is the economy. now, there's two things we would stress. one is willingness doesn't always translate into effectiveness. and secondly, remember that we are now entering a more differentiated stage of the qe trade. >> wait a second.

okay. again, i understand why they have been the best friend. i understand why they don't want to yank the rug out from under the markets, but steve liesman just said the fed has a problem. do they? >> oh, yeah. where i disagree with steve. he said i wouldn't recommend anybody reading the fed minutes, i think the other view, read the fed minutes. because the fed minutes have this enormous contrast. on the one hand, the economic discussion is really boring. it's all about how muted things are, how modest things are and basically they've done the same thing they've done almost every time since the crisis, which is lower immediate projections and increase further down. but the policy discussion is amazing. there are so many open questions. when do you taper? how do you taper? can you dealing taper from forward guidance? how do you communicate? should owe lower on reserves? what do you do with cost and risk? that part, becky, gives you a sense of how complicated the

current stage of modern central banking is. that's important for the markets. that's why the trade that has worked so well, you've got to be more differentiated. and as mario said an hour and a half ago, and i totally agree, the safety net, the safety margin that's built into risk assets is much less now and therefore you've got to be much more careful in how we apply the trades. >> mohammed, peter wrote yesterday he thought this was the key line from the fomc minutes. he says participants generally expected that the data would provide -- would prove consistent for ongoing improvement and labor market conditions. and would thus warrant trimming the pace of purchases in the coming months. in the coming months, the uz that mean as early as december? does that mean you think tapering starts in march? and what happens to the ten-year as a result? >> so no one knows for sure when it's going to start. that's a very discreet decision that's done on judgments, very difficult to predict, especially when you have a committee that's all over the place. but if you tell me over the next

12 months are they going to taper? absolutely they're going to taper. are they going to do it in a gradual fashion? absolutely. are they going to try importantly for markets to strengthen forward guidance? yes. that has trade implications. we've been saying for a while, bill gross has been tweeting it. look at the curve trade. the front end of yield curves is protected. and you can make money going long the front end, short the long end. the other trades that take into account the fact they are lucky to taper but they will not taper in isolation, they will do other things. >> the interesting thing is trying to figure out again what happens to the ten-year. right now it's at 2.8%. obviously it's moved up from where we were earlier in the year. if we were to taper as early as december, what happens to the ten-year then? does it go to 3% and beyond? >> yeah, we think it's in a broad range of about 2.60 to 3.10 in the short-term.

that's where mostly it's going to be. there are some uncertainties, technical uncertainties, including if they taper and also something you mentioned earlier, there's also the signals out of china, i think joe mentioned it earlier. so, you know, this is an uncertain time and that's why we keep on telling people, focus on what's less uncertain and have option to react. >> always nice talking to you. >> thank you, becky. coming up, we're going to talk retail stocks with jim cramer. he comes on to talk about his show but, you know, we have things to ask him about, you know, right for our show. target, abercrombie, dollar tree all trading. don't miss "squawk box" tomorrow, our guest host tom fanning ceo of southern company. doing whatever they can to provide it. and he's got a lot to say about regulation and everything else.

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welcome back, let's get to the new york stock exchange where jim cramer joins us now. the perfect person to make sense of these crazy retail numbers

we've seen this morning. jim, we start with target. >> target. i'm listening to your discussion about taper. it's always kind of funny because it's so different from the boots on the ground view. i mean, here, target's third quarter financial results continued strong execution, but not true. well, not in my opinion. but then it then it says where consumer spending remains constrained. then you go to dollar tree. very cautious consumer. target very good operator. i'm surprised they can't do better in this environment. they keep talking about how bad off the consumer is. why is that a good time to raise rates? i know all of the idiosyncrasies. >> i agree with you on the health of the consumer. how much of it is because of what wal-mart told us that they are going to be aggressive with discounts in the quarter and

margins thin everywhere. >> williams and sonoma reported a fine quarter. >> you put costco in a higher brackett in terms of target audience. >> costco has the bmws in the parking lot. you have home depot operating well and lowes poorly. wal-mart not operating well. do i want to buy target? maybe three days from now people want to buy target. is it competitive environment? some guys not able to. so it is case by case. there are more cases that are bad which makes me feel like maybe the enterprise is strong. the consumer which is about two-thirds of the economy is not strong. the idea that we are parsing words and a release of wal-mart

or target or dollar tree i would rather for those guys. things are very tough out there. >> what do you make of abercrombie? >> it is time for jeffreys to go. >> are you calling for his head officially? >> his contract is up this year. there is no reason for that man to continue to be there. i'm sure he is a nice guy. >> is that the guy with the plane? >> the guy that said the things about youth and thoughts. i'm not on his page. >> cool people, in a world of facebook and twitter you don't go there. that is like jamie dimon doing the twitter thing. the 69-year-old fellow, time for youth. >> we can be cool after high school. we can eventually be cool. >> we are still working on it. >> there is hope. >> you want cool? you have to go to there sears

release. launched adam levine and nicki minaj in 500 k mart stores. launch them? launch what? set him up? launching -- and launching what? like a product line? or are we launching them? >> adam is sexy now. >> getting his conference call. watch nicki minaj. did somebody tell nicki minaj she was launched? launch lady gaga. >> what happens to her? you go to sears or k mart for years they have been empty. you can't find a body on the floor to help you out with anything. >> back to the shopping your way. like at burger king. they are going to slice and dice

it. every item is going to be an ipo in the end of this thing. i was listening to mario talking about the different auto. sears has a couple. they can do the sears base, auto base and then new sears tire and then die hard. he can split it up and maybe when he is finished maybe there will be something. they are launching nicki minaj. >> i looked up launch in the urban dictionary. it is used to describe just a quick acceleration in a car from a complete stop. pop the clutch and go. that's all i got. >> urban dictionary immediately. >> jim's launching nicki minaj. >> maroon 5. >> we will see you in just a couple minutes. always holding back and never

willing to really tell us what he thinks. when we come back our guest host has been the cfo of td ameritrade. we'll have him.

let's get back to our guest host for the last word. stock is up nicely about 70% or so just based on improving environments since 2008, obviously. any of it because of the fed? would you attribute any of it? >> actually, we have lost about 70% of our revenue from where the fed has taken interest rates from 2008 until today. >> it is hard to make. you had nothing in the bond market to sell then. >> no. we had about 100 billion in

assets in the accounts. and the interest was 1.41%. >> you are like a saver. >> that's the hard part. 2014 is off to a good start. trading activity is up. delta between $1.20 and $1.40 range is predicated on trading. >> did you open the new -- do you have facilities anywhere? you don't have retail outlets, per se? >> we have a little over 100 branches. >> you have 120 in five years? >> the ones we have will probably relocate some geographically and get them biggerer. i don't think we will need that many. >> you don't expand that way. you have plenty in capacity if people decide to call you. >> a lot more trading and certainly a scalable business.

>> we are ready for it to come back full force in terms of we have plenty of tvs ready to be tuned. >> thank you. >> thanks for having me. >> it was very interesting. that does it for us today. make sure you join us tomorrow. right now it is time for "squawk on the street." >> welcome to "squawk on the street". first breaking news on the treasury and gm. >> thanks, carl. treasury anticipates exiting the controversial general motors investment. it will do so by the end of 2013. it's launching its plan to sell the remaining 31.1 million gm shares. it has recouped about 39 billion from the 49 billion it invested. that would be at today's share price if it sold the shares for 1.1